Maryland attorney general files antitrust action against ACC
Maryland is filing legal action against the ACC to dismiss a suit in North Carolina and declare the exit fee as an antitrust violation.
|Maryland president Wallace Loh said in September he didn't think the ACC's exit fee would hold up in court. (US Presswire)|
Maryland attorney general Douglas F. Gansler announced Friday that he has taken two legal actions against the ACC regarding the University of Maryland's departure to join the Big Ten.
The first action, filed on behalf of Maryland's Board of Regents, alleges the ACC's exit fee violates antitrust laws. The second is a motion to dismiss the ACC's legal action against Maryland -- filed in Greensboro, N.C., arguing that "a North Carolina court has no jurisdiction over the sovereign state of Maryland and its public universities."
"Our lawsuit calls the ACC's 'exit fee' what it really is -- an antitrust violation and an illegal penalty," said Gansler. "Our motion in North Carolina will ensure that a Maryland court will rule on the case."
While the lawsuits themselves are significant, the fact that they were filed comes as no surprise. West Virginia and the Big East had three lawsuits in different courts as the Mountaineers made a hasty exit to join the Big 12 last year. However, this legal action is different because it could set precedent for the ACC.
When the ACC added Notre Dame last September as a partial member, the league presidents voted to boost the exit fee to three times the operating budget. In Maryland's case, that sum is roughly $52.3 million. Two schools voted against the hike in exit fee: Maryland and Florida State.
Maryland president Wallace Loh explained the reasoning behind his vote both before and after the announcement that the Terrapins would join the Big Ten. Loh said he voted against the increase on "legal and philosophical grounds," believing that it would not hold up in court.
"The law says that when you have liquidated damages and in advance you anticipate a breaching of the contract, we will decide what the damages will be," Loh said in September 2012. "You talk about damages, not penalties, and it has to be a reasonable estimate. That’s the law. We live in a free economy. We want people to move freely in and out of relationships. That’s the philosophical principle. What constitutes reasonable? That’s for a court to decide.
"But if the damages are so huge that it prevents the mobility, the free movement of people, then I think it’s not good for society. Others may not be looking at it from this principle, and that’s their prerogative."
Maryland announced its move in November. Since then, the relationship between the school and the ACC has soured. The ACC has not only excluded Maryland from meetings about competition, scheduling and planning but also begun withholding shared revenue payments as "collateral" against the exit fee.
"They sent us a letter saying they are withholding royalties, the amount of money [the University of Maryland is] entitled to," Gansler told The Washington Post on Friday. "They’re doing this because the University of Maryland owes them $53 million.
"When they sent us the letter, that triggered the ability for us to bring a lawsuit in court, saying you owe us this money. That’s what we filed. We filed it for the money and for the antitrust implications."
An exit fee of three times the operating budget was supposed to be a sign of solidarity and dissuade conference members from seeking other opportunities. As the Big Ten, Big 12 and other leagues contemplate expansion, the last thing the ACC needs is for the fee to fall in court. If Maryland proves that leaving the conference is easier than expected, things could get tense behind the scenes at a few ACC institutions.
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